$44 trillion price tag for clean energy

12 May 2014

An additional $44 trillion in investment is needed to secure a global clean-energy system by 2050, according to the International Energy Agency (IEA). Decarbonizing the electricity generation sector, it says, will be key to meeting climate targets.

In the latest edition of the biennial Energy Technology Perspectives, the IEA presents three scenarios to show how the global energy system could evolve between now and 2050. In all of its scenarios, the OECD agency sees electricity's role in the energy system growing faster than any other source. It estimates the share of electricity of overall energy demand will grow from 17% in 2011 to between 23% and 26% by 2050.

The main scenario - the 2 Degree Scenario (2DS) - is in line with the Intergovernmental Panel on Climate Change's analysis and demonstrates the actions needed in the energy sector to limit the rise in global temperatures to no more than 2°C.

"We must get it right, but we're on the wrong path at the moment ... A radical change of course at the global level is long overdue"

Maria van der Hoeven,IEA executive director

In the 2DS, the share of fossil fuels in global primary energy supply drops by almost half - from 80% in 2011 to just over 40% in 2050. Energy efficiency, renewables and carbon capture and storage (CCS) make the largest contributions to global emissions reductions under the scenario. The IEA says that nuclear, end-use fuel switching, and power generation efficiency and fuel switching are "essential" to reach the 2DS target cost-efficiently.

Under the 2DS scenario, some 22 GWe of new nuclear generating capacity must be added annually by 2050. However, the IEA notes that global nuclear capacity "is stagnating at this time" and by 2025 will be 5% to 25% below needed levels, "demonstrating significant uncertainty." It suggests that the high capital and low running costs of nuclear create the need for policies that provide investor certainty.

Investment

The IEA estimates that an additional $44 trillion in investment is needed in global electricity systems by 2050. However, it says that this represents only a small portion of global GDP and is offset by over $115 trillion in fuel savings. The new estimate compares with $36 trillion in the IEA's previous analysis in 2012. This increase, "partly shows something the IEA has said for some time: the longer we wait, the more expensive it becomes to transform our energy system."

"While clean energy technology deployment in emerging economies has rallied over the past year - making up for declines in the industrialized world - the overall picture of progress remains bleak," according to the IEA.

It claims, "Cost-effective, practical solutions can increase efficiency, moderate electricity demand and decarbonize almost all power generation by 2050." However, in order to attain this, "the decision-making process needs to be revised, abandoning the short-term, siloed attitudes of the past, and embracing a longer-term systems approach that identifies synergies within all sectors of the energy system."

Launching the report, IEA executive director Maria van der Hoeven said: "Electricity is going to play a defining role in the first half of this century as the energy carrier that increasingly powers economic growth and development. While this offers opportunities, it does not solve our problems; indeed, it creates many new challenges."

She added, "We must get it right, but we're on the wrong path at the moment. Growing use of coal globally is overshadowing progress in renewable energy deployment, and the emissions intensity of the electricity system has not changed in 20 years despite some progress in some regions. A radical change of course at the global level is long overdue."